My name is Bond, Green Bond: Paris’ innovative finance tools

What has the host of the COP21 – the city of Paris - been doing to do its duty on the global climate agreement it shares its name with ? By shaking up financial markets with its innovative finance tools and following a clear long-term trajectory, the French capital is on its way to become carbon neutral and doing 100% green investment in the process.

The new Paris Climate Plan, bound to be adopted by the city council of the French capital in the upcoming weeks, is one example of walking the talk on the commitments made by France during the COP 21. It consists of 500 measures in the areas of buildings, transport, energy, food, waste, lifestyle, mobilization of local actors and finance that aim to make the city carbon neutral by 2050. Carbon neutrality means to divide by two the energy consumption of Paris and reach 100% of renewable energy in 2050.

To finance its Plan, the city is challenging ‘traditional’ funding approaches to trigger millions of EUR of private investments.

In 2015, just before the COP21, Paris had issued its very first green bond worth 300 million EUR and already proved to be successful in raising the interest of investors. Two years later, the city issued its second climate bond worth 320 million EUR on the market. These were long term bonds (17 years) at an interest rate of 1.43%. The reaction of the financial market players was unexpected : in 3 days, very diverse domestic and international investors offered 1.2 billion EUR to the city of Paris !
In July 2017, the city also set up a Local Investment Fund for Ecological Transition which invests in local start-ups that develop products and services contributing to its energy transition. The national promotional bank Caisse des Dépôts, a historic partner of the city, provides support in project engineering and the design of the fund. ADEME, the French Environment and Energy Management Agency, is involved in the governance of the fund, advising Paris on the choice of companies to finance.

Yann Françoise, Head of climate, energy and circular economy department in the city of Paris, presented the French capital’s success story at the Covenant of Mayors Investment Forum in February and send out a call for action to his city peers : “There is enough cheap money on the market ready to be invested in energy and climate projects, but cities need a long-term strategy , guarantees and a credible monitoring and reporting system to measure the progress they are doing on their climate objectives. We need much closer cooperation between energy and climate and financial departments in order to get to the next level in our transition”.

Paris has aligned its investments with the Paris agreement, and its green investment bid has stirred up ‘traditional’ financial markets, city-investor relations, internal city governance structures and partnerships. Can Paris’ success be replicated in other European cities ? The PROSPECT peer-to-peer learning programme on innovative financing schemes will take up the challenge. Paris will soon share its expertise with its European peers !